The Woz Talks Apple, IPOs, and Home Brew

While many of us may now associate Apple (Nasdaq: AAPL) with iPhones and iPods, the Apple of old played a key role in developing a new type of computer --- a more, well, personal computer. A couple years back, the Fool's Mac Greer talked with the man behind that motherboard --- Apple co-founder Steve Wozniak, the author of iWoz: From Computer Geek to Cult Icon: How I Invented the Personal Computer, Co-Founded Apple, and Had Fun Doing It, a book he wrote with Gina Smith. We're re-running our talk with the Woz as part of Fool.com's Apple week.

Mac Greer: Steve, it is March of 1975, and you joined the Home Brew Computer Club, which met in a garage in Menlo Park, Calif. You say this is the day when the computer revolution really started. Paint that picture for us.

Steve Wozniak: Well, my whole life was about computers, and I was designing all these hot products. If I ever saw anything, having no money at all, I had to figure out a way to build it. I had to figure out clever ways to build things for almost no cost with very few parts. As soon as I went to this club, I finally realized that my lifetime dream of having my own computer was going to happen, because microprocessors were enough of a computer, or enough of a start, to make a computer out of. And they were affordable.

I just knew that it was just a matter of time. Basically, I had to design it myself, but I could always do that.

Greer: And where do you get this radical idea to build a computer that had a typewriter-like keyboard and a television-like display monitor?

Wozniak: Well, it is really surprising, but it was very much luck and very much by accident. I didn't really sit down and say, "How could I make the computer different?" Although ... you would never want to go back and build the same computer again, and I had built the "Cream Soda Computer" five years before. The Cream Soda Computer looked like all these computers you see with tons of switches and lights and push buttons, and you have got to know what it is all about to even touch it.

Now, all these people were buying kits that kind of were Cream Soda Computers. I wanted to go beyond that. But I had just in the last few months built myself a device [similar to what] I saw a friend using to type on a big, clunky teletype machine, like you see in the military ... to a computer all the way in Boston from California. And I thought, "Oh my God, I have to have one of those." And whenever I said, "I have to have one of those," that means I am going to figure a way to build it for almost nothing.

So I had built a terminal [on which] I could type on a keyboard. It would talk over a very, very, slow modem to a computer in Boston. Then, when the computer talked back to me -- and it was always slow text based on modems -- that computer would talk to my TV set, where I would display the characters. So I already had a keyboard and a television device; all I had to do was make the computer right here on the same PC board -- just put my computer chips on the board. And then I would be typing to my own computer and watching it on my TV set.

Greer: And tell us about when you first met Steve Jobs.

Wozniak: Actually, it was while I was building the Cream Soda Computer. A friend was helping wire it together in his garage, and he said, "Hey, you should meet this guy Steve Jobs, because he likes electronics, too. And he also does pranks, you know, so he reminds me a lot of you." Steve came over, and we hit it off, and we were best friends for the next seven years.

We talked electronics. ... He wasn't really an engineer/designer like I was. I was like a supreme star, and he was just very advanced for high school. We talked about pranks we had played; we talked about music we liked; we talked about philosophies of life and what we believe in and didn't and just hit it off really well.

Greer: And when you and Steve Jobs first talked about starting a company, you were a bit skeptical?

Wozniak: Well, I already had the computer made, and I was giving it away for free because that is kind of my style. ... I wanted to help the world get to this new, glorious place where people were going to be so improved and made masters of their own lives with computers. So I was giving it away, and Steve said, "Hey, why don't we sell?" He didn't say, "Let's start a computer company." He said, "Let's start a company of our own to sell the PC boards. We will make them for $20; sell them for $40. And then people can build your computer easier."

The first thing I said was, "Well, I had better check it out with the company that I have an employment contract with, Hewlett-Packard (NYSE: HPQ) ," and I tried to. I wanted Hewlett-Packard to do it so bad, but they wouldn't.

Greer: And at the time, Steve, you thought you would be at HP for your whole life?

Wozniak: I totally knew it. I was not going to leave HP for anything. So when Steve and I started this little company, it was just on the side. I still worked at Hewlett-Packard as an engineer. I was working on the greatest products of all time -- the scientific calculators.

Greer: And let's talk a little about the birth of Apple. How much money did you start Apple with?

Wozniak: I sold my calculator, my Hewlett-Packard 65 calculator, for $500; Steve sold a van for a little bit of money. We put a few hundred bucks each into paying somebody to design a PC board for us. ... Shortly after we made our PC board, we got an order for 100 fully built computers for twice my annual salary. [A] $50,000 order -- biggest financial shock in Apple's history. And when that happened, I went back through Hewlett-Packard's legal department, because I wanted to stay clean with my employer.

And then we needed the money for parts, but Steve was very persuasive. He gets on the phone; he calls magazines for publicity; he calls stores to sell our product. He calls suppliers for parts, and he got the parts suppliers to give us the parts on 30 days' credit, even though neither of us had a bank account. We had no savings money. We had absolutely nothing at all to draw on, but we could build the computers and take them down to a store and get paid cash in 10 days.

Greer: And at what point, Steve, do you start thinking that you might have a viable business on your hands?

Wozniak: Well, as soon as we got that $50,000 order. ... And that is just the start. That was a shock. I thought that was a viable business, and it was on the side of [my job at] Hewlett-Packard. I did an awful lot of designs for the computer -- hardware and software. I did every bit of the engineering, actually. Every single bit of the engineering. And within three months, I actually sat down and designed a fresh computer. Not just this little machine designed to talk to computers in Boston -- a fresh computer from the ground up, like none [had] ever seen before. That was the Apple II.

Greer: And Apple went public back in 1980. It was an incredibly hot initial public offering. And you had your own stock offering -- something you called "The Woz Plan." Tell us about that.

Wozniak: Yes, I didn't start this company for money. It was just sort of something that came. And so I wasn't that attached to it. But I didn't want to sell some stock to a big financial guy on the outside who wanted to buy some, but I wanted to sell some stock and get a car and a house. I came up with a plan. I said [that the] engineering people and marketing people at Apple ... should be the ones to benefit from this huge stock thing when it goes public. ... So I pretty much had a list, I think, of about 40 of them within Apple, and they each got maybe the value of a house out of that deal.

But I also took five other young people who had started with us -- didn't have a job that was worth a single share of stock -- and I thought, "These were the guys that I joked with. These were the guys that I told ideas to and they thought were great, the guys that I would sit down [with] and write a little program and draw some color swirls on a screen. And their reactions influenced me to keep going." They were a part of the community, so I actually gave them each a huge amount of stock.

Greer: And Apple, of course, has had such tremendous success with the iPod, and there is evidence to suggest that the Mac is gaining ground as well. But given the success of the iPod, do you foresee a day where Apple may not be making PCs?

Wozniak: Well, I don't foresee it, but it could happen. I just don't like to look that far into the future, because you can't be too wrong. You can easily take an opinion and say some elegant words, but the trouble is, as an engineer, I like to be real analytical. I [want to] know for some reason, some good solid reason, this is what the outcome is going to be.

I think it is amazing ... could a big company have spun out the Apple that started? Could Hewlett-Packard have spun it out? Could Apple today spin it out? And almost anyone I know that was around in that time frame says the Apple of today couldn't have spun out Apple again the way it started. But they did spin out the iPod. They did develop another hot product that just changed and revolutionized the world. And I think that is really great when a big company can do that.

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Are we not conveniently forgetting all the genuinely original technical work at Xerox Parc where a huge amount of the personal computer concept (the user interface) consisting of a mouse, keyboard, and TV screen was first developed and demonstrated?